Survey: Property investors back and targeting Melbourne

Scott Kuru December 4, 2024 4 min read

KEY POINTS

The latest quarterly survey by Australian Property Investor magazine has found that buyers are returning to the market in force
Melbourne is seen to offer great affordability, with Victoria having some of the best investment prospects for the coming 12 months
An overwhelming number of investors believe home prices will continue to increase, while a majority are optimistic about the property market

Every three months, Australian Property Investor (API) magazine asks its readers to respond to a series of questions about the property market and their investment plans for the year ahead.

The answers provide a fascinating window into the mindset of Australian property investors, and the results of the latest published survey (Quarter 3, 2024) are no exception.

Investors are back

Fewer people are sitting on the property market fence, according to API magazine’s latest Property Sentiment Report for the third quarter of 2024.

After peaking in the final quarter of 2023 at 39%, the survey finds that those choosing not to transact in the property market over the previous 12 months have fallen to just 22%.

As to the year ahead, API Editor Craig Francis says, “Investors accounted for 63% of those intending to buy in the next 12 months, an almost 10 percentage point rise in Q2 2024.

“Given the cost of living crisis, high interest rate environment and uncertainty around the direction of property prices generally, it’s notable that the proportion of investors intending to buy in the next 12 months has risen sharply,” he says.

“This could be attributed to the fact that more than 80% of respondents are of the opinion that, overall, property prices will continue their upwards march deep into 2025.”

Mr Francis says the latest survey results also show “a marked shift towards the traditional investment vehicles of houses, units and apartments, with a corresponding drop off in the proportion of buyers looking to buy alternative property assets.”

API’s findings seem to back up figures from the Bureau of Statistics that show lending to investors rose nearly 30% in the year to the end of September 2024.

Where are property investors targeting?

While the latest API Property Sentiment Survey shows Queensland remaining the top destination for investors, it is now only just ahead of Victoria, which has jumped an astonishing 14% in just 12 months.

“Possibly the most dramatic shift in sentiment contained in this report is the dramatic upturn in respondents identifying Victoria as having the best investment prospects for the coming 12 months,” Editor Craig Francis says.

“Victoria’s perception of being unfriendly towards investors has been well and truly usurped by its more recent perception of being undervalued and overdue for a capital growth rebound.”

“From being an afterthought among investors, Victoria now ranks a close second to Queensland as the state on their collective radar,” he says, while “Western Australia’s red hot property market has seemingly convinced many that it has run its race, and it has duly slipped well down those rankings.”

It seems many other investors are now waking up to this.

While property prices in the Victorian capital have stagnated and eased over the past three years, many now predict Melbourne will see some of the strongest price growth in the next property cycle.

As Craig Francis puts it, “With that (recent price) fall has come a perception that Melbourne is now affordable and, if history is anything to go by, poised for capital growth that would return it to its more familiar spot sitting beneath Sydney as the country’s priciest market.”

Reasonable investor expectations

The latest API Property Sentiment Survey also contains findings that challenge the popular trope pedalled by political parties like the Greens that property investors and landlords are “greedy”.

While rental market vacancy rates have only eased slightly, the API survey shows that 70% of landlords (up from 66% in the last survey) are keen to retain a good tenant rather than trying to pursue the highest possible rental return.

It also finds investment property owners are now more realistic about what constitutes a satisfactory rental yield.

The majority surveyed now believe 3.6-4.5% provides a satisfactory return, down from 4.6-5.5%.

“Even though rents continue to rise, albeit at a decreasing pace month-on-month, rental yields have eased due to property price growth exceeding the pace of rental income rises,” Craig Francis says.

“With that has come lower expectations among landlords.”

Positive sentiment

With the Reserve Bank of Australia continuing to hold the cash rate at a 13-year high of 4.35%, the API survey finds that signs are emerging of property investors having greater sensitivity

to interest rate levels.

43% said another increase in interest rates would affect their intention to buy an investment property in the next 12 months, while 27% said such a move by the RBA would affect their decision to sell a property.

However, the survey finds that a clear majority of investors remain positive about the prospects for Australian residential property, with more than 4 in 5 expecting prices to rise in the next year.